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Key Factors to Impact Omega Healthcare's (OHI) Q2 Earnings

·4 min read

Omega Healthcare Investors, Inc. OHI is slated to report second-quarter 2022 results on Aug 1 after the closing bell. The company’s quarterly results are likely to display a year-over-year decline in revenues and funds from operations (FFO).

In the last reported quarter, this healthcare REIT delivered a surprise of 8.82% in terms of adjusted FFO per share. Results reflected better-than-expected revenues.

The company beat estimates in three of the trailing four quarters and missed in the other, the average beat being 2.20%. This is depicted in the graph below.

Omega Healthcare Investors, Inc. Price and EPS Surprise

Omega Healthcare Investors, Inc. Price and EPS Surprise
Omega Healthcare Investors, Inc. Price and EPS Surprise

Omega Healthcare Investors, Inc. price-eps-surprise | Omega Healthcare Investors, Inc. Quote

Investing in the long-term healthcare industry, mainly in skilled nursing (“SNF”) and assisted living facilities, Omega Healthcare has emerged as a leading SNF-focused REIT and achieved diversification in terms of geography and operator in the United States and the United Kingdom. The company’s properties are operated by a diverse group of healthcare companies, primarily in a triple-net lease structure. This diversification is anticipated to have supported OHI’s top line in the to-be-reported quarter.

However, the nonpayment of the rent by some operators is likely to have affected the company’s performance in the second quarter. In a June 2022 investor presentation, Omega Healthcare noted that in April 2022, it collected the rent from operators representing roughly 91% of its second-quarter 2022 annualized contractual rent and mortgage obligations.

OHI also noted that with many operators still struggling with the pandemic’s impact on occupancy and staffing, there is a high risk that additional operators might not be able to pay per their contractual terms.

With low occupancy, several facilities are likely to have remained unprofitable. Adding to the woes is elevated labor costs. These are likely to have pressured the company’s operating performance in the second quarter.

The Zacks Consensus Estimate for the second-quarter rental income is pegged at $211 million, down from $213 million in the prior quarter and $218 million in the year-ago period. The consensus mark for second-quarter revenues of $251.9 million suggests a 2.14% decrease year over year.

Omega Healthcare’s activities during the June-end quarter were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has remained unrevised at 76 cents over the past month. The figure also suggests a 10.6% decline year over year.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict a surprise in terms of FFO per share for OHI this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an FFO beat. However, that’s not the case here.

Omega currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are some stocks from the REIT sector — Public Storage PSA and SBA Communications Corporation SBAC — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

Public Storage, slated to release quarterly numbers on Aug 4, has an Earnings ESP of +0.31% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

SBA Communications Corporation, scheduled to report quarterly numbers on Aug 1, currently has an Earnings ESP of +0.95% and carries a Zacks Rank of 3.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Public Storage (PSA) : Free Stock Analysis Report
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